The name used to legally establish a corporation, limited liability company (LLC), or partnership is the name that is registered with the government. For legal and tax reasons, the company is known by this name. Additionally, it is the name that is written on official papers like contracts, licenses, and permits. A company’s legal name should be distinctive and not in use by another registered company. It is often chosen to reflect the nature of the firm.
Contrarily, a trade name, commonly referred to as a “doing business as” (DBA) name, is a name that a business uses for marketing and branding. A trade name has no legal standing and offers no legal protection. It’s merely another moniker that a company employs to promote itself. As an illustration, even if a company’s legal name is “ABC Corporation,” its trade name can be “ABC Solutions.” Although a trade name shouldn’t be similar to the company’s legal name, it should be distinctive.
A trade name must be registered in Arizona with the Secretary of State’s office. Using a name other than its legal name for branding and advertising is permitted with this registration. Any company that wishes to use a name other than the legal name must register the trade name.
Although using a DBA might be a practical marketing strategy, there are several drawbacks to take into account. The lack of legal protection that a DBA offers is one of its main negatives. This means that even if you have already registered your trade name as a DBA, another company may still be able to use it. Furthermore, since a DBA does not establish a distinct legal company, the business owner is directly responsible for any debts or legal actions.
Nevertheless, registering a DBA has advantages. The fundamental goal of a DBA is to let a company function for branding and marketing reasons under a different name. A DBA might be helpful for companies that seek to diversify into new markets or geographic regions. In order to open a new location in a different city, for instance, a restaurant might register a DBA using the name of the new location.
A DBA might be used, for instance, by John Smith, a sole owner, to launch his own graphic design company called “Designs by John.” John’s legal name, however, is not “Designs by John.” To utilize that name for marketing and branding purposes, he would have to file a DBA.
In conclusion, it is critical to know the distinction between a trade name and a business legal name when starting a business. A trade name is a different name that is used for marketing and branding whereas a business legal name is the name that is officially registered with the government. Businesses may find registering a DBA to be helpful, but it’s crucial to weigh the pros and risks before taking the plunge.